Roland Meyer

Roland Meyer from RBC Capital Markets inquired about the current state and durability of competitive pricing, particularly in the property sector, and whether the market is nearing a bottom in 2026. He also asked about the source of this competition (traditional vs. new capital), potential M&A opportunities given current multiples, and the company's capital management strategy regarding special dividends versus share buybacks.

Answer

Waleed Jabsheh, President and CEO, stated that competition, especially in energy and property lines, remains intense with no anticipated short-term easing. He clarified that the competition primarily stems from traditional, larger carriers with excess capital, rather than new market entrants. Jabsheh indicated no strong M&A opportunities are currently on their radar, emphasizing IGI's preference for organic growth. Regarding capital management, he explained that share buybacks are ongoing, while special dividends are assessed at year-end based on strong financial results, comfortable capital adequacy, and the absence of immediate capital needs for other opportunities, all while protecting their S&P rating.

Roland Meyer from RBC Capital Markets inquired about the current state and durability of pricing competition, particularly in the property and energy lines, and whether the market is nearing a bottom in 2026. He also asked about the nature of competitors (traditional vs. new capital), potential M&A opportunities, and the company's capital management strategy regarding special dividends versus share buybacks.

Answer

President and CEO Waleed Jabsheh stated that competition, especially in energy and property, is consistent with prior quarters and is not expected to ease in the near term, driven by traditional, larger carriers with excess capital. He noted no strong M&A opportunities are on the radar, as IGI prefers organic growth. Regarding capital management, Mr. Jabsheh explained that share buybacks occur throughout the year, while special dividends are determined at year-end based on strong financial results, capital adequacy, and the absence of immediate capital needs for growth, ensuring the protection of the company's S&P rating.

Roland Meier inquired about Bowhead's methodology for translating industry data into loss ratio picks, particularly how it's tailored to their niche business, and the long-term targets for the expense ratio considering both headwinds and tailwinds.

Answer

Bradley Mulcahy, CFO, detailed that Bowhead uses proprietary third-party actuarial information, not just Schedule P data, which is tailored to their portfolio's nuances, such as limited large national account exposure in casualty. He also noted that while there are headwinds like ceding fees, technology initiatives are accelerating efficiency gains, making them comfortable with a low 30s expense ratio and striving for lower.

Roland Mayer inquired about Bowhead's methodology for translating industry data into loss ratio picks, especially given its niche business, and asked about the long-term target for the expense ratio considering current headwinds and technology-driven tailwinds.

Answer

CFO Brad Mulcahey explained that Bowhead uses detailed proprietary third-party actuarial information, tailored to its portfolio's nuances, rather than generic Schedule P data, to set picks and development patterns, adding conservatism. Regarding the expense ratio, Mr. Mulcahey noted that while there are headwinds like ceding fees, technology initiatives are accelerating efficiencies, making the company comfortable with a low 30s target and aiming to go even lower.

Roland Meyer asked for an update on the carrying value of the deferred tax asset and when clarification on its recognition is expected. He also inquired about Arch Capital's view on M&A in the current environment, considering the company's debt-to-capital ratio and natural deleveraging.

Answer

CFO François Morin stated that the deferred tax asset (initially $1.2 billion) was amortized by about $100 million in 2025 and will continue in 2026. He noted that it might go away in late 2026 or early 2027 depending on changes in Bermuda law. CEO Nicolas Papadopoulo reiterated Arch Capital's focus on strategic assets that improve the platform or add lines of business (buy versus build). He added that other M&A deals would need to be "amazing" and are unlikely given the current market conditions.

Roland Mayer at RBC Capital Markets requested an update on the carrying value of the deferred tax asset and when clarification on its recognition ability is expected, and asked for Arch's view on M&A in the current environment, considering its deleveraging.

Answer

CFO and Treasurer François Morin stated that the deferred tax asset, initially $1.2 billion, was amortized by about $100 million in 2025 and will continue in 2026, with its future dependent on Bermuda law, potentially ceasing to be an asset in late 2026 or early 2027. CEO Nicolas Papadopoulo reiterated that Arch favors strategic M&A that improves its platform or adds lines of business, but at this stage, given market conditions, only an "amazing deal" focused on efficiencies would be pursued, making it unlikely.

Roland Meyer inquired about Hanover's long-term expense ratio goals, specifically if year-over-year improvement is still expected despite the upcoming change in guidance. He also asked if current tech investments are neutral to the expense ratio due to efficiency gains or if they are still adding pressure, and sought clarification on the company's approach to increasing share repurchase volumes.

Answer

CEO Jack Roche stated Hanover intends to be disciplined on expenses and expects expense leverage with growth, funding tech investments by reducing expenses elsewhere. CFO Jeff Farber clarified that moving away from expense ratio guidance does not imply a lack of discipline, noting that strong underwriting results in 2025 led to an expense ratio elevation. He added that tech investments are funded by actively managing and creating capacity from other expenses. Jack Roche explained that increased share repurchases ($100 million in the last four months) are a result of strong earnings and lower growth leading to capital build-up, and buybacks are expected to continue playing a meaningful role in capital allocation.

Roland Mayer asked about the long-term goal for expense ratio improvement and the impact of technology investments, as well as the company's approach to share repurchase volumes and capital allocation.

Answer

President and CEO Jack Roche stated the company intends to be disciplined with expenses, expecting leverage with growth, and funds technology investments by reducing expenses elsewhere. CFO Jeff Farber clarified that moving away from specific expense ratio guidance does not indicate a lack of discipline. Jack Roche (Jeff Farber) noted the company bought back $100 million in stock over the last four months due to strong earnings and lower growth, emphasizing a balanced approach to capital allocation including growth, buybacks, dividends, and potential inorganic deals.